Reed v. Hamby CA4/1

Filed 10/20/26 Reed v. Hamby CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA TRANG REED, D085831 Plaintiff and Respondent, (Super. Ct. No. 37-2024- 00031363-CU-NP-CTL) v. RODERICK HAMBY et al., Defendants and Appellants. APPEAL from an order of the Superior Court of San Diego County, Loren G. Freestone, Judge. Affirmed. Worthington Law and Brian P. Worthington for Defendants and Appellants Roderick Hamby and Tracy Reed. Chapman Zaragoza and Zena M. Sin-Zaragoza for Defendants and Appellants Lenden F. Webb, Raza N. Khan, Katherine E. Cervantes and Webb Law Group. Haffner & Morgan and Timothy Morgan for Plaintiff and Respondent. In a prior action, Roderick Hamby and Tracy Reed (Tracy) sued Tracy’s ex-wife, Trang Reed (Trang), alleging that Trang misappropriated funds from a company allegedly owned by Hamby, Tracy, and Trang. Hamby and Tracy, 1 in their individual capacities, initially asserted breach of contract and breach of fiduciary duty causes of action against Trang. After amending their complaint multiple times to remove Tracy as a plaintiff, add a derivative claim on the company’s behalf, and remove the breach of contract claim, Hamby and his attorneys subsequently requested the suit’s dismissal without prejudice on the eve of trial. In this action, Trang then sued Tracy and Hamby and their attorneys, Lenden Webb, Raza Khan, Katherine Cervantes, and Webb Law Group, APC (collectively, WLG), for malicious prosecution. Tracy, Hamby, and WLG (collectively, appellants) filed motions to strike Trang’s complaint as a strategic lawsuit against public participation (SLAPP) under Code of Civil Procedure1 section 425.16. The trial court denied both anti-SLAPP motions after determining that Trang had shown a probability of succeeding on her malicious prosecution claim. On appeal, appellants2 only challenge the court’s ruling as to the probable cause element of Trang’s malicious prosecution claim. Specifically, they contend the court erred in finding that Trang had a probability of prevailing based on the evidence she produced showing (1) Hamby did not have a membership interest in the company that would entitle him, individually or derivatively, to either a share of its profits or to the performance of fiduciary duties, and (2) Trang was not prohibited from withdrawing funds from the company’s bank account for personal use. We conclude the trial court committed no error. When accepting Trang’s 1 Undesignated statutory references are to the Code of Civil Procedure. 2 WLG joined and adopted Tracy’s and Hamby’s opening brief and did not file their own separate brief on appeal. 2 evidence as true and viewing it in the light most favorable to her, we conclude that she has met her burden of showing a probability that she will prevail on her claim. We therefore affirm the order denying appellants’ anti- SLAPP motions. FACTUAL AND PROCEDURAL BACKGROUND A. The Business Tracy and Trang married in 2007 and had a son in 2012. In January 2011, they decided to start a secure managed data hosting business with Hamby, Tracy’s close friend. Tracy, who has a tech background, used an online legal platform to create a limited liability corporation (LLC) called Copilotco LLC (Copilotco), and to generate a draft operating agreement. The draft operating agreement, among other things, defined a “Member” as “a Person who acquires Membership Interests” as described in “Exhibit A” and “who becomes or remains a Member.” “Exhibit A” to the draft operating agreement listed the company’s members as Tracy, Hamby, and “Trinity Reed,” referring to Trang by a nickname. The exhibit indicated that Tracy would have a 34 percent ownership interest while Hamby and Trang would each have a 33 percent ownership interest. The draft operating agreement further provided that “[t]he profits and losses of the Company and all items of Company income, gain, loss, deduction, or credit [should] be allocated, for Company book purposes and for tax purposes, pro rata in proportion to the relative Membership Interests held by each Member.” Tracy was designated as the “tax matters member” of Copilotco to represent the company in its dealings with tax authorities and “to expend Company funds for professional services and costs associated therewith.” 3  The parties dispute whether the operating agreement was ever signed, and none of the parties produced an executed version of the document. Tracy asserted in his deposition that all three of them signed the operating agreement, but he believed Trang stole the only signed copy in 2019. As for oral agreements, Tracy said they agreed to keep business and personal expenses separate because Hamby “told [them] about commingling” and advised that they should “make sure that company funds get used for company things unless it is being paid out as compensation, in which case it should be clearly done so and accounted for.” Hamby testified at his deposition that the three parties met at a racquetball court to sign “letters of incorporation” for Copilotco, but he was not sure if he ever signed the operating agreement. Trang said in her deposition that she never signed, received, or reviewed a copy of the operating agreement, and that she only knew what Tracy had told her about the ownership percentages.3 While she said that Hamby “has 33 percent,” her understanding of what that meant—according to what Tracy told her—was that if and when Copilotco was sold, Hamby would be entitled to 33 percent of the sale price. According to Trang, she entered into no written or oral agreements of any kind with Hamby. Tracy had primary responsibility for generating business for Copilotco and interacting with and servicing customers. Tracy said he and Hamby hoped Trang would help market the company and assist with revenue forecasts, budgeting, and profit and loss statements. Trang was ultimately 3 Appellants assert that Trang admitted she had “reviewed” the operating agreement, but the transcript of her testimony is unclear on the nature of her “review.” She testified that she was unfamiliar with the agreement and had only “looked at” and “flipped through it.” 4 only in charge of invoicing customers and taking credit card payments, which Tracy agreed was helpful to the business. Trang also worked at Costco while helping with Copilotco. Hamby agreed to help maintain the servers and provide hardware support. Although the parties disagree about many details of their business arrangement, they do not dispute that Hamby agreed to delay taking any share of Copilotco’s profits until “some point in the future,” which never arrived. Hamby never received any portion of Copilotco’s profits and never reported income from Copilotco’s earnings. Hamby had started at least two LLCs other than Copilotco in the past, and he understood that if he had an ownership interest in a business, he was supposed to receive a K-1 tax form for tax purposes to document and report the percentage of his interest in that company and its earnings. But Hamby never received a K-1 form for Copilotco. Trang and Tracy opened a bank account for Copilotco at U.S. Bank, N.A., in April 2011. On the bank’s form dictating the terms of the account, both Trang and Tracy were listed as individuals “authorized . . . pursuant to the terms of the operating agreement” to deposit funds, execute checks, and withdraw money “to the individual order of any such individual and/or person signing the same, without further inquiry or regard to the authority of said individual or the use of said checks or other instruments or orders for the payment of money, or the proceeds thereof[.]” Trang and Tracy certified that the “foregoing authorities do not conflict with the articles of organization, the operating agreement [or] any by-laws of the Company; and that all documents executed or orders issued by said individuals on behalf [of] the Company represent valid and binding obligations of the Company.” Both 5 Trang’s and Tracy’s signatures are also on the Copilotco account’s signature card. The company did not set a salary or wage for Trang or Tracy, and Hamby agreed that Tracy was entitled to compensation. Hamby also said that Trang’s pay was for Trang and Tracy to decide. The parties agreed that Tracy would take money from the company account “in the form of owner draw,” and according to Tracy, “there was no point” in both him and Trang “taking out compensation” since they were married. Tracy said that because they were married, “paying [him] was paying Trang.” Trang testified at her deposition that she paid household expenses using Copilotco’s bank account, including groceries, clothing, and their son’s classes. But she said she did so with Tracy’s full knowledge, and that they had agreed to treat those funds as Copilotco’s profits and paid taxes on those amounts as personal income. According to Trang, they had had that arrangement since the company’s inception and Tracy never discussed only using the company’s bank account funds for business expenses, nor did he ever tell her to limit how much she withdrew from the account. She said Tracy was aware of her account withdrawals because she would tell him about them. She also testified that he explicitly told her they could take money out of Copilotco’s account to pay themselves for their work for the company, and he emphasized that they “should not leave any profit left in the business in the last month of the year” because otherwise the company would be taxed on that money. In 2013, Tracy hired an accountant, David Heistein, to prepare and file Copilotco’s tax returns. Heistein’s understanding from his conversations with Tracy was that there were no other partners involved with Copilotco besides Tracy, and Heistein had never heard of Hamby until he was 6 subpoenaed in the underlying litigation. Heistein explained in his deposition that a K-1 form allocating loss or profit must be issued to all members of a multi-member LLC, whether the member participates in the company’s profits or not. But no K-1 forms were ever issued for Copilotco because Tracy and Heistein treated the company as a single-member entity for tax purposes, which included filing a “Schedule C” to report income or loss as a sole proprietorship. Heistein further explained that when two members of an LLC are married, they are treated as a single member. If Hamby had been a member of Copilotco from 2011 through 2017, then according to Heistein, the company’s tax returns for those years would have been erroneous. Every year that Heistein prepared Copilotco’s taxes, he and Tracy reviewed the company’s bank statements to designate which transactions were business expenses and which were “exceptions” or personal expenses. These designations were then recorded in a Schedule C form, and all of Copilotco’s net profits were reported as self-employment income on the Reeds’ joint personal tax return. Tracy later said he was unaware of the “extent of the damage” from Trang’s withdrawals from the account until 2020. But Tracy was made aware of Trang’s spending from Copilotco’s account in the years leading up to 2018 when he and Heistein reviewed the company’s transactions to compile Copilotco’s Schedule C filing. Tracy confirmed that each of the charges from Copilotco’s account was reflected in a Schedule C tax filing. Tracy also did not dispute that he had access to the company’s bank account at all times. The Reeds had trouble in their marriage in 2017. In December 2017, Tracy removed Trang as a signer and owner from Copilotco’s bank account. But a month later, in January 2018, Tracy added Trang back to the account because he “needed the help.” The two separated on November 20, 2018, and 7 Tracy filed for divorce on November 28, 2018. That month, Tracy asked the bank to remove Trang’s online access to Copilotco’s account and disable her debit and credit cards. Hamby said he learned about Trang allegedly taking money from Copilotco’s account from Tracy around the time when the Reeds started having marital issues. Tracy showed Hamby a list of highlighted transactions from Copilotco’s bank statements that Tracy said were unauthorized. Hamby’s understanding was that Copilotco shut down because the company could not afford to pay a $5,000 bill from their server host due to Trang’s misappropriation of funds. Hamby also said that Tracy was generally his source of information about the company, and Hamby was unaware that Copilotco was generating more than $10,000 per year in revenue in 2017 because he did not receive profit and loss statements and never reviewed Copilotco’s tax returns. For the years Copilotco was doing business, Hamby never knew how the company’s expenses were recorded or tracked. Tracy confirmed that Copilotco did not “have much of an accounting system” and did not generate quarterly or monthly profit and loss statements. After the Reeds’ divorce trial, the family court accepted their stipulations regarding the division of community debt and Tracy took Copilotco’s debts as his sole and separate obligation. The family court dissolved the Reeds’ marriage in January 2020. B. The Prior Litigation In July 2020, Tracy and Hamby brought a lawsuit in pro per against Trang for breach of contract and breach of fiduciary duty. The original complaint alleged that the parties orally agreed Tracy “would be the only manager to withdraw funds from Copilotco’s account” and that Trang began 8 misappropriating funds from the company “unbeknownst” to them in July 2016. The complaint alleged that of $162,036.28 in misappropriated funds, Trang used at least $42,000 to pay the Internal Revenue Service (IRS) “for her personal debts” and automatically withdrew $800.00 a month “for personal use and expenses[.]” According to the complaint, Trang’s misappropriations caused Copilotco to become insolvent because Tracy and Hamby “could not market the business” or “upgrade the hardware necessary to operate the business.” The complaint further alleged that Trang breached an operating agreement that all the parties entered into which provided that “the parties would share in profits.” Tracy and Hamby sought compensatory and punitive damages. Trang, also pro per at the time, requested a bill of particulars from Tracy and Hamby under section 454 setting forth an accounting of all monies they alleged she misused. Their response listed, among other things, overdraft fees, payments to the IRS and Franchise Tax Board, Target credit card charges, car payments, ATM withdrawals, checks issued to Trang, retail charges, and mortgage payments. The dates of the charges ranged from July 2016 to March 2020. After retaining WLG as their counsel, Tracy and Hamby sought to amend their complaint in May 2022 to pursue a derivative action and join Copilotco as “an indispensable and necessary party to th[e] action” because “recovery is inadequate in a shareholder derivative suit as long as the corporation is not a party to the action[.]” In granting their request to amend, the court ordered that Tracy and Hamby promptly effect service of the amended complaint on Copilotco. They did not serve Copilotco, but obtained leave to amend their complaint a second time in August 2022 to attach an unsigned copy of the operating agreement as an exhibit and to 9 remove Tracy as a plaintiff because the Reeds’ divorce had not yet been finalized, their assets were still combined, and “he held a community property interest” during his marriage to Trang. In the third amended complaint, Hamby only alleged the breach of fiduciary claim and removed the breach of contract claim. He also removed allegations regarding punitive damages. The fourth amended complaint was substantially the same as the third amended complaint. Meanwhile, Hamby, Tracy, and Heistein were all deposed in March 2022. Hamby testified in his deposition that he would like Tracy and Trang to “make [him] whole” and asserted that Copilotco was entitled to a third of the $162,036.28 in damages to reflect his membership interest. He acknowledged that at least some of the expenses Trang allegedly misappropriated—like mortgage and car payments—went towards the Reeds’ community property. He also could not identify which, if any, of the charges went solely to Trang’s benefit as opposed to the community’s benefit. He could not confirm the purpose of the expenses, who incurred them, or who benefited from them. Similarly, Tracy testified in his deposition that he did not know what the disputed payments from Copilotco’s account were for, and he acknowledged that at least some were for community expenses like car and mortgage payments. In September 2023, Tracy and two individuals he identified as “consultants” called Heistein and demanded that he pay Copilotco $450,000 within two or three days to cover the company’s legal fees to make up for his alleged accounting “mistakes” in failing to file multi-member partnership returns. Tracy also took steps to report Heistein to state accountancy regulators. Tracy testified that he made demands during that call with the intent of pressuring Heistein into agreeing to a monetary settlement. 10  On the eve of trial in January 2024, about three and a half years after the suit was first filed, WLG requested that the trial court dismiss the underlying litigation without prejudice. The court granted the request. When the court dismissed the case, Copilotco had still never been served with any version of Tracy’s and Hamby’s complaint. C. The Current Litigation In July 2024, Trang filed a malicious prosecution claim against appellants. Her complaint alleged that appellants initiated and maintained the prior lawsuit against her despite knowing there were no reasonable grounds for doing so. Trang further alleged that she had suffered psychological and financial harm from having to defend the underlying lawsuit. Appellants filed anti-SLAPP motions under section 425.16 on the grounds that the complaint arose from protected litigation activity and also lacked merit. In her opposition to the anti-SLAPP motion, Trang submitted her own declaration and a declaration from her attorney, Robert Ottilie. She also lodged exhibits including Copilotco’s filings with the secretary of state, bank documents, pleadings from the underlying litigation, tax records, documents from the Reeds’ divorce proceedings, e-mails, and deposition transcripts. Trang conceded that the first prong of the anti-SLAPP statute was met, but she argued (among other things) that Tracy and Hamby had no probable cause to initiate or continue prosecuting their complaint in the underlying action because Tracy knew from the outset, and Hamby and WLG soon learned, that Trang was authorized to withdraw funds from Copilotco’s account and did so with Tracy’s knowledge and permission for the community’s benefit. Trang also argued that appellants knew, at least after Heistein’s deposition testimony, that Hamby never actually owned a 11 membership interest in Copilotco such that he would be entitled to a share of Copilotco’s profits, or that would allow him to file a derivative action. The trial court denied appellants’ anti-SLAPP motions. First, the court found that Trang’s complaint arose from appellants’ litigation of the underlying case, a protected activity. The court then found that Trang had demonstrated a probability of prevailing because when viewing Trang’s evidence as true and making all reasonable inferences in her favor, she had shown appellants lacked probable cause in asserting Hamby was a one-third owner of Copilotco and alleging that Trang was “not allowed to withdraw funds from the company account and misappropriated company funds for her personal use.” The court went on to explain how Trang’s evidence was also sufficient to make a prima facie case as to the malice, favorable termination, and damages elements of her malicious prosecution claim. DISCUSSION A. Statutory Framework The anti-SLAPP statute provides, in relevant part, that “[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech . . . in connection with a public issue shall be subject to a special motion to strike [anti-SLAPP motion], unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).) Ruling on an anti-SLAPP motion involves a two-step process: first the court must decide whether the defendant has shown the challenged claim arises from activity protected by the anti-SLAPP statute, and if so, the court then must decide whether the plaintiff has shown a probability of prevailing on the claim. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67; Sugarman v. Brown (2021) 73 Cal.App.5th 152, 159.) Only a claim 12 that both arises from protected activity and lacks merit is a SLAPP subject to being stricken. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (Navellier); Weeden v. Hoffman (2021) 70 Cal.App.5th 269, 282 (Weeden).) We review a ruling on an anti-SLAPP motion de novo and engage in the same two-step process as the trial court. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1067; Weeden, supra, 70 Cal.App.5th at p. 282.) “We consider ‘the pleadings, and supporting and opposing affidavits . . . upon which the liability or defense is based.’ (§ 425.16, subd. (b)(2).) However, we neither ‘weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant’s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.’ [Citation.]” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 (Soukup).) B. Protected Activity Regarding the first step, it is undisputed that Trang’s malicious prosecution claims arise from protected speech or petitioning activity. “The constitutional right of petition encompasses ‘ “ ‘the basic act of filing litigation[,]’ ” ’ ” and a claim for relief filed in court is “indisputably . . . a ‘statement or writing made before a . . . judicial proceeding[.]’ ” (Navellier, supra, 29 Cal.4th at p. 90, citing § 425.16, subd. (e)(1).) The litigated issues themselves need not be matters of public interest for the litigation to constitute protected activity. (See Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123.) Accordingly, we conclude that the first prong of the anti-SLAPP statute is met. 13  C. Probability of Prevailing on Malicious Prosecution Claim The burden to make a prima facie showing to satisfy the second prong of the anti-SLAPP analysis is “not high,” and claims with “minimal merit” can proceed. (Greene v. Bank of America (2013) 216 Cal.App.4th 454, 458.) To prevail in a malicious prosecution claim, the plaintiff must show the underlying action was: “(i) initiated or maintained by, or at the direction of, the defendant, and pursued to a legal termination in favor of the malicious prosecution plaintiff; (ii) initiated or maintained without probable cause; and (iii) initiated or maintained with malice.” (Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 775–776.) Appellants only challenge the trial court’s findings regarding probable cause on appeal, so we limit our analysis to that element. “[T]he probable cause element calls on the trial court to make an objective determination of the ‘reasonableness’ of the defendant’s conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable.” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 878 (Sheldon Appel).) The court makes that determination by inquiring “whether any reasonable attorney would have thought the claim tenable.” (Id. at p. 886.) Probable cause to bring an action “ ‘does not depend upon it being meritorious, as such, but upon it being arguably tenable, i.e., not so completely lacking in apparent merit that no reasonable attorney would have thought the claim tenable.’ [Citation.]” (Maleti v. Wickers (2022) 82 Cal.App.5th 181, 218 (Maleti).) “ ‘A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.’ [Citation.]” (Soukup, supra, 39 Cal.4th at p. 292.) 14  Malicious prosecution lies where at least one theory in the underlying case was pursued without probable cause, even if there was probable cause to pursue other theories. (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 55–57.) Additionally, probable cause must be viewed at more than one point in the duration of the prior litigation. (Maleti, supra, 82 Cal.App.5th at p. 219.) Even if the malicious prosecution defendant had probable cause to initiate the suit, his or her decision to continue prosecuting the case on that theory after learning it was not supported by probable cause can result in liability for malicious prosecution. (Zamos v. Stroud (2004) 32 Cal.4th 958, 971.) “ ‘[I]f there is no dispute concerning the existence of the facts relied upon to show probable cause, the trial court must then determine as a matter of law whether such undisputed facts do or do not warrant an inference of probable cause.’ [Citation.]” (Sheldon Appel, supra, 47 Cal.3d at p. 880.) But when there is a dispute as to the state of the defendant’s knowledge, and the existence of probable cause turns on resolution of that dispute, the jury must resolve the threshold question of the defendant’s factual knowledge or belief. (Id. at p. 881.) Thus, when there is evidence that the defendant may have known that the factual allegations on which his lawsuit depended were untrue, the jury must determine what facts the defendant knew before the trial court can determine the legal question whether such facts constituted probable cause to institute the challenged proceeding. (Ibid.) 1. Hamby’s Ownership Interest in Copilotco Appellants first contend that we should decide there was probable cause as a matter of law. (See Sheldon Appel, supra, 47 Cal.3d at p. 875.) But we are precluded from doing so because, contrary to appellants’ 15 assertions, a dispute exists regarding the state of appellants’ belief or knowledge of the facts they rely on to show probable cause. (Id. at p. 881.) First, Hamby asserted at various times in the underlying litigation that he individually, or on behalf of Copilotco, was entitled to damages resulting from Trang’s alleged misappropriation of company funds. His claims hinged on his status as a member of Copilotco. But Trang asserts in her malicious prosecution claim that Tracy and Hamby knew that Hamby never actually became a member of the company, and she has produced evidence that if credited, would support her assertion. Filings with the secretary of state and the IRS did not list Hamby as a member during the relevant period.4 The first time Hamby’s name appeared as a member of Copilotco in a filing with the secretary of state was in September 2023, well after the underlying litigation was initiated. Heistein testified that Tracy never informed him there were other members in the company, and Heistein prepared Copilotco’s taxes for several years under the assumption that the company was a single- member LLC. Hamby admitted he was unaware of Copilotco’s revenue amounts, did not receive K-1 forms or profit and loss statements, agreed to forgo receiving profits, never reviewed Copilotco’s tax returns, and did not 4 In two supplemental declarations in support of Tracy’s and Hamby’s anti-SLAPP motion before the trial court, Webb attached copies of a purported statement of information filed with the secretary of state on February 23, 2011, listing Hamby as a member of Copilotco. The trial court disregarded Webb’s declarations and their attachments, citing cases holding that courts have discretion to ignore reply declarations in their entirety when they submit new evidence for the first time in a reply. (See Nirschl v. Schiller (2023) 91 Cal.App.5th 386, 406, fn. 10; Maleti, supra, 82 Cal.App.5th at p. 228.) Because neither party addresses the February 2011 document in their appellate briefs and appellants have not argued on appeal that the court abused its discretion in disregarding Webb’s declarations, we do not consider the document on appeal. 16 have access to the company’s bank account. In the divorce proceedings, the family court considered the Reeds to be Copilotco’s exclusive owners. Tracy himself treated the company as a community asset throughout the divorce and never informed the family court that Hamby was ever a member of the company. The only written documentation reflecting that Hamby had a one-third ownership interest in Copilotco consists of a 2011 e-mail between Hamby and Tracy and the unsigned operating agreement. But the 2011 e-mail did not include Trang, and neither Trang nor Hamby could specifically recall signing the operating agreement. The operating agreement itself defined “Member” as someone who “acquires Membership Interests . . . and who becomes or remains a Member.” (Italics added.) This language indicates that additional steps were required for Hamby to become and stay a member. In other words, even if the parties intended for Hamby to have a one-third membership interest, there is evidence to support Trang’s assertion that Hamby never actually became or remained a “member” during the relevant period, either under the operating agreement or otherwise. Moreover, although Tracy and Hamby asserted at various times in the underlying litigation that they agreed to, were governed by, and performed their “significant” obligations under the operating agreement, Tracy’s and Hamby’s own testimony contradicted those assertions. The operating agreement required that Copilotco keep “[c]omplete books of account of the Company’s business, in which each Company transaction shall be fully and accurately entered, shall be kept at the Company’s principal executive office . . . .” According to Tracy, no such books were created or kept. In a section entitled “Members and Voting Rights,” the agreement provided that a vote of the members was “required to approve or carry an action,” and that 17 voting should be based on membership interests. But Tracy admitted there are no minutes documenting any votes ever being held, nor is there evidence Hamby otherwise exercised his rights as a member of the company before initiating the underlying litigation. Importantly, the operating agreement provided that “[t]he profits and losses of the Company” should “be allocated, for Company book purposes and for tax purposes, pro rata in proportion to the relative Membership Interests held by each member.” The parties do not dispute that this did not happen because Copilotco filed its taxes as a sole proprietorship, Hamby was never allocated any profits or losses, and he never received a K-1. Despite a clause in the operating agreement stating that it constituted “the whole and entire agreement of the parties with respect to the subject matter” of the agreement and requiring that any amendment be done by a written instrument executed by all the members, Tracy and Hamby asserted in the underlying litigation that they had made oral agreements outside of the operating agreement’s four corners to give Hamby one-third ownership. While Trang’s testimony was contradictory or unclear at times regarding Hamby’s status as a member, and she testified at one point that she agreed Hamby was a one-third owner, she also testified that she had only heard from Tracy that Hamby was a member, and that she personally made no agreements—written or oral—with Hamby regarding any membership interest. Without a proper foundation based on her own personal knowledge, as opposed to what she was told by Tracy, Trang’s lay opinion on Hamby’s ownership interest would be inadmissible and lacking in evidentiary value. (Evid. Code, § 800.) Moreover, Trang’s statement of subjective belief as to Hamby’s ownership interest would not qualify as a judicial admission because “judicial admissions involve facts, not legal theories or conclusions.” 18 (Stroud v. Tunzi (2008) 160 Cal.App.4th 377, 384.) “Legal conclusions and assertions involving a mixed question of law and fact are not the stuff of judicial admissions.” (Ibid.) Thus, Trang’s deposition testimony does not establish probable cause as a matter of law. We conclude that when we construe the evidence in her favor, Trang has made a prima facie showing that Hamby lacked probable cause to pursue claims against her in the underlying litigation because he did not become or remain a member during the relevant time period. 2. Trang’s Withdrawal of Funds We next conclude that there is evidence that Tracy not only knew about Trang’s use of the allegedly stolen funds before initiating the underlying litigation, but that he encouraged and approved of it. Trang testified that she told Tracy about her withdrawals from Copilotco’s account and that she and Tracy agreed they would treat the funds as profits and pay taxes on the amounts as personal income. According to Trang, Tracy explicitly told her they “should not leave any profit” in the business at year-end so that the company would not be taxed on those funds. Tracy himself acknowledged that at least once a year while preparing Copilotco’s taxes with Heistein, he was made aware of all the payments being made from the company’s account in the process of preparing a Schedule C. Tracy also did not dispute that he always had access to Copilotco’s bank account, and it is reasonable to infer from the fact that he was able to remove Trang’s access to the account on multiple occasions that he refrained from doing so earlier because he had no reason to. Although Tracy asserted that the parties entered into an oral agreement not to commingle funds, Trang testified that she made no oral agreements with Hamby regarding commingling. When asked to describe 19 how that purported agreement came about, Tracy only said that Hamby had advised them to keep business and personal funds separate. The mere fact that Hamby made admonitions about commingling—without evidence that each party agreed to adhere to his admonitions—is insufficient to create an oral contract. (See Skirball v. RKO Radio Pictures, Inc. (1955) 134 Cal.App.2d 843, 861 [an oral agreement may be valid “when the respective parties orally agree upon all the terms and conditions of a contract with the mutual intention that it shall thereupon become binding”].) Furthermore, Tracy’s own testimony about the nature of the alleged misappropriations shows that he directly benefited from the charges that went towards mortgage payments, taxes, and household expenses. Both Tracy and Hamby acknowledged that at least some of the expenses Trang allegedly incurred—like mortgage and car payments—went towards the Reeds’ community property. Neither Hamby nor Tracy could identify which, if any, of the charges went solely to Trang’s benefit as opposed to the community’s benefit. Hamby also could not confirm the purpose of the expenses, who incurred them, or who benefited from the IRS and franchise tax board payments. Lastly, there is evidence to support Trang’s assertion that Tracy and Hamby knew Trang’s withdrawal of funds did not cause Copilotco’s insolvency, as alleged in each version of the complaint in the underlying litigation. Specifically, evidence shows that Tracy knew the loss of Copilotco’s biggest clients—which occurred for reasons unrelated to Trang’s account withdrawals—was the primary reason why the company had to shut down. Tracy testified at his deposition that Copilotco “never had very many clients.” The former owner of eDirect Publishing, Inc. (eDirect), one of Copilotco’s biggest clients, testified that eDirect stopped doing business with 20 Copilotco in August 2018 because eDirect sold its assets to another business. Trang’s evidence shows that eDirect contributed significantly to Copilotco’s profits beginning in 2015, and that without eDirect’s business, Copilotco’s costs would have exceeded its revenue in 2016 and 2017. It is thus reasonable to infer that the loss of eDirect’s business was the cause of Copilotco’s insolvency, and that Tracy was aware of that fact. Tracy also testified at his deposition that MedicFusion, another large client, started working with Copilotco in 2016 or 2017 and that Tracy “asked them to migrate away” before Copilotco’s business wound down because Tracy “knew the end was coming at some point.” But according to an e-mail message lodged as an exhibit in opposition to Tracy’s and Hamby’s anti- SLAPP motion, MedicFusion had already been working with Copilotco for four years when it gave Tracy notice in October 2016 that it was terminating Copilotco’s services—not the other way around. Furthermore, Tracy testified that he thought Copilotco “should have pivoted to something slightly different a little sooner” because “three or four years after [it] started doing business” in 2011, other large public cloud services “came up to speed” on providing the kind of secured data environment that Copilotco offered its customers. He stated that by 2015, competition from larger businesses interfered with Copilotco’s ability to develop its business further. Such evidence contradicts Tracy’s assertions that Copilotco became insolvent or lost clients as a direct result of Trang’s alleged misappropriations, rather than due to market conditions and external factors. Viewing the evidence as a whole, we thus conclude that Trang made a prima facie showing from which a trier of fact could conclude that Tracy had no probable cause to initiate and prosecute the underlying proceeding 21 bec